As expected, voters in Ecuador have officially approved a proposal to prohibit elected officials and other public servants from being allowed to keep their personal assets, including companies and capital, in overseas tax havens.
However, the outcome of the 19 February referendum – which saw 55.12% of voters in favour of the plan and 44.88% opposed to it, and took more than a week to be officially known – has been little reported by the world media, in spite of its seeming significance in a world that is increasingly moving towards greater transparency and exchange of tax-relevant information.
Alex Cobham, chief executive of Tax Justice Network, a UK-based organisation that campaigns against tax avoidance and the use of tax havens, said it wasn’t immediately obvious why the matter hasn’t been covered more by the world’s mainstream media, but that it might be because the measure would “only become useful if the list of secrecy jurisdictions, or ‘tax havens’, [used to determine which jurisdictions would be considered permissible] is a meaningful one”.
“Historically, these lists have been highly political, and have tended to feature small islands, and not such big players as the United States,” Cobham added.
“Our Financial Secrecy Index provides a different approach, based on objectively verifiable criteria, and so gives a much more straightforward assessment.
“It will be interesting to see if Ecuador and other countries in the region move towards a common list, similarly based on objectively verifiable criteria, as is now being discussed for the first time in the European Union.”
Another issue that may have held back coverage of the politician/tax haven referendum could be that a nine-candidate presidential election held at the same time was inconclusive, forcing a runoff election to be scheduled for 2 April. The runoff will see the governing party candidate, Lenín Moreno, go head-to-head against a conservative former banker, Guillermo Lasso. How the new regulation is to be enforced, if indeed it is to be, will be determined, observers point out, by who wins next month’s poll.
The referendum on whether politicians should be allowed to keep assets in tax havens was said to have been the first of its kind, but it has already sparked commentary among those who have heard of it that it might be adopted elsewhere.
Even before the vote, fifteen people signed a letter to London’s Guardian newspaper which appeared beneath the headline, “Let’s follow Ecuador in holding a referendum on tax havens”.
Since the Panama Papers, the letter – signed by two UK members of Parliament, two members of the Scottish Parliament, two members of the Welsh Assembly, a “peace campaigner”, an actor and three UK union officials, among others – notes, “there has never been a better time to construct a global consensus powerful enough to overcome the huge vested interests at play”.
It continues: “We welcome this innovative referendum and hope that Ecuador’s leadership on this issue will inspire other governments to make bold moves too.”
Cobham said the Tax Justice Network also welcomed the Ecuadorean measure to prevent the country’s politicians from using tax havens, “as a signal of changing norms around the legitimacy of holding assets in offshore secrecy jurisdictions”.
“It’s striking that the measure received much more support than did the candidate of the governing party, which shows the broad popular backing [for it],” he added.
As reported, the question asked of Ecuadorans was: “Do you agree that, for those holding a popularly-elected office, or for public servants, there should be a prohibition on the holding of assets or capital, of any kind, in tax havens?”
It’s not known what prompted the idea for a law banning Ecuador’s politicians from stashing undeclared assets outside of the country, but it’s thought that last year’s so-called Panama Papers scandal, involving the organised publication of data contained in more than eleven million documents that were leaked from a Panamanian law firm, Mossack Fonseca, was probably a factor. As the map above shows, Ecuador isn’t far from Panama. (In fact, it’s 1,182 km, or 734 miles, according to Distancefromto.net, which says this is less than an hour and a half by plane).
Also, like many Latin American countries at the moment, much of the population is enduring hard times now that the recent commodities boom has come to an end. The International Monetary Fund has forecast the Ecuadorean economy will shrink by 2.7% this year.
Ecuadoreans are also said to be unhappy about the way the country has been run recently, due to economic troubles and corruption scandals, which have also been a recent feature elsewhere in South America.
Located on the west coast of South America, above Peru and below and to the west of Colombia, Ecuador has a population of around 16 million, and a nominal GDP per capita of just US$6,196, making it 83rd on the International Monetary Fund’s 2015 GDP list.
Thus far, Ecuador appears not to be on the list of more than 100 countries that have signed up to the OECD’s so-called Common Reporting Standard scheme, for automatically exchanging tax- relevant financial information.
Some published reports have quoted those in favour of the referendum banning Ecuadorean politicians from using tax havens as saying as much as US$30bn could currently be held in overseas financial institutions, on behalf of wealthy Ecuadorans.
To see the final vote on the referendum, click here, and follow the links to “Consulta Popular”.